Treuhand v George & Anor

A costs order is not shown to involve an error of principle merely because another judge might have apportioned the costs differently. Permission to appeal should be refused where the order was within the range of reasonable decisions open to the trial judge on the findings made. A judge may protect a party who was brought into litigation by another person's conduct by awarding that party costs in full, even where some issues pursued in the defence ultimately fail. The relevant question is whether the chosen order was legitimately open to the judge, not whether it was the only order that could fairly have been made.

The claimant, acting as trustee of the Argento Trust, sued a husband and wife in relation to a deferred payment arrangement for building materials and its assignment from Morgan Samuel Ltd. The Queen's Bench Division, in a judgment delivered by Mrs Justice Black on 3 March 2002, gave judgment against the husband alone and dismissed the claims against the wife.

The wife was awarded her defence costs, payable by the claimant with recovery over against the husband. The husband was also ordered to pay the claimant's costs and his wife's costs in the Part 20 proceedings. He applied for permission to appeal, arguing that the wife's costs should have been apportioned because much of her unsuccessful case concerned the existence and repayment of the debt. The central issue was whether the costs order arguably resulted from an error of principle or had no realistic prospect of success.

The application for permission to appeal was refused.

1. Permission threshold. The question was whether the costs order was arguably the only fair course available, in the sense that the trial judge was not entitled to make it. If the order was one which the judge could properly make on the particular findings, the proposed appeal had no realistic prospect of success. The fact that another judge might have apportioned the costs differently did not establish an error of principle.
2. Exercise of the costs discretion. Mrs Justice Black had addressed the precise apportionment argument. She considered that the costs could not fairly be separated, even proportionately. She also considered that apportionment would be inappropriate because the evidence which the wife had been required to investigate originated with the husband, and her understanding of the transaction arose from his conduct and statements.
3. Protection of an innocent party. The findings entitled the judge to regard the litigation as having been caused by the husband's failure to pay the debt and the wife's involvement as entirely his doing. The wife had reasonably required proof of a debt of which she knew nothing and was ultimately found to have no legal liability for it. The judge was therefore entitled to protect her from the costs of being brought into litigation, notwithstanding that some issues she explored were resolved against her.
4. The proposed challenge raised a legitimate argument but not one disclosing an appeal with a realistic prospect of success. Permission to appeal was accordingly refused.

• Court of Appeal (Civil Division): On 14 August 2002, Lord Justice Sedley refused permission to appeal. [2002] EWCA Civ 1314
• Queen's Bench Division: Mrs Justice Black gave judgment on 3 March 2002 for the claimant against the husband alone, dismissed the claims against the wife, and made the costs orders challenged in the application.